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Libya
High Growth Markets country profile
After the fall of the Qadhafi regime,
Libya is transforming itself into a
functional, representative democracy.
Real gross domestic product (GDP)
growth is expected to increase from
-2.6 percent in 2014 to 2.5 percent in
2015, and grow at an average annual rate
of 5.1 percent between 2016 and 2018, as
a more permanent government is formed,
security is restored and reconstruction
investment gathers pace.
Country overview
Business environment
Geography and climate
Economic environment
• Location: northern Africa, bordering the Mediterranean Sea,
between Egypt, Tunisia and Algeria
• GDP in 2013 was US$93.9 billion. Real GDP growth is
forecast to increase from -2.6% in 2014 to 2.5% in 2015, as a
more permanent government restores a degree of stability. As
these conditions persist, average annual growth of 5.1 percent
is expected between 2016–2018.
• Climate: Mediterranean along the coast; dry, extreme
desert in the interior
• Regions: 22 districts
• Major cities: Tripoli (1.1 million) (2009)
Political system
• Foreign direct investment (FDI) (billions): inbound: US$4.1
(2008); US$0.5 (2013); US$1.9 (2018 forecast) outbound:
US$5.9 (2008); US$2.6 (2013); US$4.1 (2018 forecast)
• Capital: Tripoli
• Exports free on board (FOB) (billions): US$61 (2012);
US$34.9 (2013); US$62.1 (2018 forecast)
Population, language and religion
• Imports FOB (billions): US$25.6 (2012); US$25.3 (2013);
US$48 (2018 forecast)
• Type of government: transitional
• Population: 6.2 million
• Urban population: 77.7%
• Sector breakdown: service sector: 37.9%; industrial sector:
59.8%; agriculture sector: 2.3%
• Demographics: 0–14 years: 26.9%; 15–24 years: 68.3%;
65 years and over: 3.9%
• Trade balance (billions): surplus of US$35.4 (2012);
US$9.5 (2013); US$14.1 (2018 forecast)
• Official language: Arabic
• Prominant religions: Muslim, Christian, Buddhist, Hindu,
Jewish, folk religion
Currency and central banking
• Stock exchanges: Libyan Stock Market (LSM)
GDP growth and inflation (average consumer price index (CPI))
100%
80%
• Local currency: Libyan Dinar (LYD)
60%
• Exchange rate: LYD1 = US$0.7933 (1 April 2014)
40%
• Interest rate (average annual rate): 3.8% (2014); 4.1%
(2013); 5% (2012); 5% (2011); 5% (2010); 5% (2009)
• Foreign exchange reserves: US$120.9 billion
(2013 estimate)
• Total debt (2013): external: US$6.32 billion; internal public
debt: 4.8% of GDP (2013 estimate)
20%
0%
-20%
-40%
-60%
-80%
2008
2009
2010
2011
2012 2013
Growth
2014 2015
Inflation
2016
2017
Source: Economist Intelligence Unit, 2014
© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
2018
Investment climate
Key considerations
• Fiscal and monetary policy: Following the collapse of the
Qadhafi regime, Libya faces political uncertainty; a situation
expected to persist until the end of 2015 as the country
continues its transitional phase. Central government should
play a prominent role in reconstruction, bringing in marketoriented reforms. Fiscal policy is likely to remain expansionary
in 2014–2015 to minimize social unrest. Public investment will
probably take second place as government spending focuses
on subsidies and public sector wage increases. General
government expenditure is forecast to increase from
69.9 percent of GDP in 2013 to 72.9 percent of GDP in 2014.
• Competition policy: During 2014–2015, a new law regulating
public-private partnerships is anticipated, to broaden the
financing scope for Libya’s development and infrastructure
projects. The government may also reform fuel and food
subsidies. Looking forward to 2016–2018, a third mobilephone license is likely to be awarded, while investment in new
infrastructure projects should boost private sector participation in
the economy.
• FDI policy: Foreign investment in the oil and gas sector
has been strong. While the current coalition government
has been unable to implement structural reforms, future
governments are likely to follow more liberal policies, and FDI
could pick up between 2016–2018. The next bidding round
for exploration licenses in 2014–2015 is set to include softer
terms, to make the oil sector more attractive. However,
foreign companies are still deterred by lax security. Due to
their geographical proximity, European firms may be willing
to take more investment risks than US oil firms. In the period
from 2016–2018, opportunities for foreign companies are
likely to expand as the new government undertakes new
infrastructure projects, post-conflict reconstruction and
expansion in electricity and water production. The government
is also expected to introduce some pro-business reforms to
encourage FDI and expansion of the private sector.
• Foreign trade and exchange controls: Libya mostly has a
large structural trade surplus. In 2013, exports amounted to
US$34.9 billion while imports were US$25.3 billion, leaving a
trade balance of US$9.5 billion. Hydrocarbons account for the
largest share of exports. The country has relatively restrictive
foreign trade and exchange controls, which are likely to
continue, limiting business expansion. During 2014–2015, the
Central Bank of Libya should continue to ease restrictions on
foreign currency transfers abroad. New free zones are forecast
in coastal areas and borders in 2016–2018. The country could
continue working towards an Association Agreement with
the European Union (EU), as well as towards World Trade
Organization (WTO) membership.
• Financing policy: Libya faces some challenges such as
political uncertainty, undeveloped policy towards private
enterprise and poor access to local sources of finance. Qadhafiera banking laws still persist, which has slowed progress in
financial sector reforms. In the years 2014–2015, the entry
of foreign banks is likely to remain restricted until the new
constitution is drafted. The gradual introduction of Islamic
banking should take place during 2016–2018, probably in
parallel with a conventional banking system. The Central Bank
may encourage greater bank lending to the private sector, and
ease entry for foreign banks to boost mobilization of financial
resources to fund infrastructure investments.
• Taxes: Law 9, 2010 on investment promotion leaves foreign
companies exempt from corporation tax for 5 years and
from taxes on imports of equipment that is essential to the
execution and operation of investment projects. A new tax
law was enacted in 2010 that reduced tax on corporate profits
to a flat rate of 20 percent. It also reduced income tax for
employees; those earning under US$763 a month pay
5 percent in tax, while those with income above the threshold
pay 10 percent. No substantial changes to the tax system are
likely until a permanent government is installed in 2014–2015.
The new government may attempt to streamline the tax
system, but should continue to apply existing legislation in
the interim.
KPMG in Libya
KPMG member firms are among the world’s leading providers of Tax, Audit and Advisory services. In Libya, KPMG has a full
member firm operating in Tripoli.
KPMG in Libya aims to respond to complex business challenges facing customers and to take a comprehensive approach
that spans professional disciplines, industry sectors and national boundaries.
For more information, please visit the KPMG in Libya website: kpmg.com/africa/en/kpmg-in-africa/libya
Sources: Economist Intelligence Unit, 2014; Central Intelligence Agency, 2014; Libyan Stock Market, 2014
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Designed by Evalueserve. Publication name: Libya: High Growth Markets country profile
Publication number: 130913q. Publication date: June 2014